EXHIBIT 10.112
HIENERGY TECHNOLOGIES, INC.
DEBT CONVERSION AGREEMENT
THIS DEBT CONVERSION AGREEMENT (the "Agreement") is made and entered into as of
the 13th day of May, 2005, by and between HIENERGY TECHNOLOGIES, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Company") and Xxxxxxxx X. Xxxxx (the "Lender").
RECITALS
WHEREAS, the Company is engaged in the research and development of
proprietary, neutron-based, "stoichiometric" sensor devices;
WHEREAS, the Lender has made several bridge loans to the Company to assist
it during a period of severe financial need, as evidenced by the delivery by the
Company to the Lender of one (1) unsecured promissory notes in the aggregate
face amount of Fourteen Thousand Dollars ($14,000), each being due on demand and
bearing interest at the rate of five percent (5%) simple interest per annum
(collectively, the "Bridge Note");
WHEREAS, inasmuch as the Company is unable to repay the indebtedness
represented by the Bridge Note in cash at this time, the Lender has agreed to
accept in lieu thereof 32,820 shares of the Company's common stock having a par
value of $0.001 per share (the "Shares"); and the Company's Board of Directors
has agreed to issue such Shares to the Lender in full satisfaction of such
indebtedness, in each case, subject to the terms of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and the mutual
promises and covenants contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, hereby agree as
follows:
1. Company Obligations. On and as of the date on which both parties execute
this Agreement (the "Effective Date"), the Company will issue to the
Lender a stock certificate evidencing the Lender's ownership of thirty two
thousand, eight hundred and twenty (32,820) Shares, at a purchase price of
Forty-Five Cents ($0.45) per Share in full satisfaction and discharge of
all indebtedness owed to the Lender as set forth in the Bridge Note.
2. Lender Obligations. In consideration and payment in full for the issuance
and delivery of the Shares to the Lender pursuant to Section 1 above, the
Lender hereby agrees:
(a) to submit to the Company, as full and complete payment for the
Shares, the originally-executed Bridge Note, which the Company shall
xxxx "cancelled" upon receipt; and
(b) to release and discharge the Company and its respective successors
and assigns from any and all further liability in respect of the
Bridge Note except as otherwise set out in this Agreement.
3. Representations and Warranties of the Subscriber. The Subscriber hereby
represents and warrants to the Company, as of the Effective Date, as
follows:
(a) the Subscriber is an "Accredited Investor" as such term is defined
in Rule 501 of Regulation D, and is familiar with the character,
integrity and business acumen of the principals of the Company;
(b) the Subscriber: (A) has no need for liquidity in this investment;
and (B) is able to bear the economic risks of an investment in the
Shares for an indefinite period of time, and could afford to lose
the entire amount of such investment;
(c) the Subscriber understands and acknowledges that a purchaser of the
Shares must be prepared to bear the economic risk of such investment
for an indefinite period because of: (A) the heightened nature of
the risks associated with an investment in the Company due to its
status as a development stage company; (B) illiquidity of the Shares
due to the fact that the Shares have not been registered under the
Securities Act of 1933, as amended, or any of the rules and
regulations promulgated thereunder (collectively, the "Act") or any
state securities act (nor passed upon by the SEC or any state
securities commission), and the Shares have not been registered or
qualified by the Subscriber under federal or state securities laws
solely in reliance upon an available exemption from such
registration or qualification, and hence such Shares cannot be sold
unless they are subsequently so registered or qualified, or are
otherwise subject to any applicable exemption from such registration
requirements; and (C) substantial restrictions on the transfer of
the Shares, as set forth in, among other documents, this Agreement,
and by legend on the face or reverse side of every certificate
evidencing the ownership of any Shares;
(d) the Subscriber understands and acknowledges that an investment in
the Shares is speculative in nature, and involves certain risks;
(e) the Subscriber is not a member of the National Association of
Securities Dealers, or of any other self-regulatory agency which
would require approval prior to any purchase of the Shares;
(f) the Subscriber is acquiring the Shares for its own investment, and
not with a view toward the subdivision, resale, distribution, or
fractionalization thereof; the Subscriber has no contract,
undertaking, arrangement or obligation with or to any person to
sell, transfer, or otherwise dispose of the Shares (or any portion
thereof hereby subscribed for), and has no present intention to
enter into any such contract, undertaking, agreement or arrangement;
(g) the offering of Shares was made only through direct, personal
communication between the Subscriber (or a representative thereof)
and the Company; the subscription for Shares by the Subscriber is
not the result of any form of general solicitation or general
advertising including, but not limited to, the following: (i) any
advertisement, article, notice or other communication published in
any newspaper, magazine, or other written communication, or
broadcast over television, radio or any other medium; or (ii) any
seminar or meeting to which the attendees had been invited by any
general solicitation or general advertising;
(h) the Subscriber has been advised to consult with an attorney
regarding legal matters concerning the purchase and ownership of the
Shares, and with a tax advisor regarding the tax consequences of
purchasing such Shares;
(i) the Subscriber is a corporation which was not organized for the
specific purpose of acquiring the Shares and has other investments
or business activities besides investing in the Company; and
(j) this Agreement, once executed and delivered to the Company by the
Subscriber, constitutes the valid and legally binding obligation of
the Subscriber, enforceable against such Subscriber in accordance
with its terms.
4. Execution of Agreement. At such time as the Company has executed this
Agreement, this Agreement shall be the valid and legally binding
obligation of the Company, enforceable against the Company in accordance
with its terms.
5. Miscellaneous.
(a) The Subscriber agrees that, once executed by it, the Lender may not
cancel, terminate or revoke this Agreement, or any Agreement in
respect of the Shares which it may make hereunder or pursuant
hereto, and that this Agreement shall survive the death, permanent
or temporary disability, dissolution, winding up or liquidation (as
applicable) of the Subscriber, and that this Agreement shall be
binding upon, and inure to the benefit of such Subscriber's heirs,
executors, administrators, successors in interest and permitted
assigns.
(b) All notices, requests, demands and other communications to be given
shall be in writing and shall be deemed to have been duly given on
the date of personal service or transmission by fax if such
transmission is received during the normal business hours of the
addressee, or on the first business day after sending the same by
overnight courier service or by telegram, or on the third business
day after mailing the same by first class mail, or on the day of
receipt if sent by certified or registered mail, addressed as set
forth following the signature of such party at the end of this
document, or at such other address as any party may hereafter
indicate by notice delivered as set forth in this Section 6(b).
(c) This Agreement shall constitute the binding agreement of the
parties, enforceable against each of them in accordance with its
terms. This Agreement may not be assigned by the Subscriber, whether
by contract or by operation of law, without the prior written
consent of the Company, which consent may be given or denied as the
Company, in its sole and exclusive discretion, may deem appropriate.
(d) This Agreement, together with its exhibits, constitute the entire
and final agreement and understanding between the Subscriber and the
Company with respect to the agreement of the Lender to accept the
Shares in full and complete satisfaction of the Bridge Note, and the
issuance and cancellation, as applicable, thereof, and supersedes
any and all prior oral or written agreements, statements,
representations, warranties or understandings by any party, all of
which are merged herein and superseded by this Agreement.
(e) The headings provided are for convenience only and shall have no
force or effect upon the construction or interpretation of any
provision of the Agreement. Furthermore, in interpreting this
Agreement, the reader shall adopt the plural form of any word
written in the singular, and the feminine form of any word written
in the masculine, whenever the context or circumstances of such
provision so require.
(f) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
(g) Each party agrees to execute such other and further documents and to
perform such other and further acts as may be reasonably necessary
to carry out the purposes and provisions of this Agreement.
(h) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of California applicable to the
performance and enforcement of contracts made within such state,
without giving effect to the law of conflicts of laws applied
thereby. In the event that any dispute shall occur between the
parties arising out of or resulting from the construction,
interpretation, enforcement or any other aspect of this Agreement,
the parties hereby agree to accept the exclusive jurisdiction of the
Courts of the State of California sitting in and for the County of
Orange. In the event either party shall be forced to bring any legal
action to protect or defend its rights hereunder, then the
prevailing party in such proceeding shall be entitled to
reimbursement from the non-prevailing party of all fees, costs and
other expenses (including, without limitation, the reasonable
expenses of its attorneys) in bringing or defending against such
action.
(i) The provisions of this Agreement are severable, and if any one or
more provisions is determined to be illegal, indefinite, invalid or
otherwise unenforceable, in whole or in part, by any court of
competent jurisdiction, then the remaining provisions of this
Agreement and any partially unenforceable provisions to the extent
enforceable in the pertinent jurisdiction shall continue in full
force and effect and shall be binding and enforceable on the
parties.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
THE CORPORATION:
HIENERGY TECHNOLOGIES, INC. ATTEST:
By: /s/ Xxxxxx X. Xxxxxxx By:
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Xxxxxx X. Xxxxxxx Acting Corporate Secretary
THE INVESTOR:
XXXXXXXX X. XXXXX WITNESS:
By: /s/ Xxxxxxxx X. Xxxxx By:
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